Personal reliefs and tax credits
The personal reliefs and tax credits you can use to reduce your income tax liability are:
As a deduction when computing taxable income
No limit: Gifts to the Minister for Finance (s 483).
€150,000: Employment and Investment Incentive Scheme (EIIS) (s 490).
€50,000: Film investment (ends 2014) (s 481).
€35,000: This is the maximum deduction available to employees working in Algeria, Bahrain, Brazil, Chile, China, Columbia, Congo, Egypt, Ghana, India, Indonesia, Japan, Kenya, Kuwait, Malaysia, Mexico, Nigeria, Oman, Pakistan, Qatar, Russia, Saudi Arabia, Senegal, Singapore, South Korea, South Africa, Tanzania, Thailand, United Arab Emirates, Vietnam. (s 823A). It is proportionate to the number of qualifying days spent working in those countries.
€75,000: Carer for incapacitated person (s 467).
€31,750: Expenditure on heritage buildings/gardens (s 482).
€6,350: Seafarer allowance (s 472B).
€3,810 with €1,270 increase for each child: Previously long-term unemployed person (s 472A). In the second tax year of employment, it is €2,540 with €850 increase for each child, and in the third tax year, €1,270 with €425 increase for each child.
As a tax credit against tax liability
No limit: Medical expenses (s 469).
€3,600: Widowed parent in the first year after bereavement; €3,150 (second year); €2,700 (third year); €2,250 (fourth year); €1,800 (fifth year).
€3,300: Incapacitated child (per child) (s 465).
€3,300: Married couple, or civil partners, basic personal tax credit (s 461).
€2,700: Health insurance premiums (s 470B), where the insured is aged 85+ on contract date or renewal date;
€1,650: Basic personal tax credit (s 461).
€1,650: Single person child carer credit (s 462). Goes to the child’s primary carer.
€1,650: Blind person (s 468).
€1,650: Employee tax credit (s 472).
€3,300: Widowed person, or surviving civil partner (bereavement year) (s 461).
€3,000: College fees (Full-time course) (s 473A) (excess over).
€1,500: College fees (Part-time course) (s 473A) (excess over).
€1,270 Fisher tax credit (s 472BA).
€1,100: Home carer (s 466A).
€950 Earned income tax credit (s 472AB).
€640: Rent paid by individual aged 55 or over.
€640: Rent paid by married couple/widowed person, or civil partners aged under 55.
€550: Earned income tax credit (s 472AB).
€540: Widowed person, or surviving civil partner (other years) (s 461A).
€490: Married couple, or civil partners one of whom is aged 65 or more (s 464).
€320: Rent paid by married couple/widowed, or civil partners person aged 55 or over.
€254: Training course fees (s 476) (max).
€245: Individual aged 65 or more (s 464).
€70: Dependent relative (per relative) (s 466).
€40: Rent paid by individual aged under 55.
The other main reliefs from income tax are:
(a) Home loan interest (s 244) Loans taken out after 31 December 2012 do not qualify unless approved before that date and drawn down in 2013.
Loans taken out between 2004 and 2008 continue to obtain relief, loans taken out between 2009 and 2012 are also relieved at 30%, but relief is abolished from 1 January 2018. During 2013 to 2017 inclusive, the interest ceiling for married couples and widowed individuals is €6,000, and for single persons it is €3,000, and the maximum rate at which relief will be given is 15% for first-time buyers and 10% for non-first time buyers.
(c) Compensation for change in work practices (disturbance money) (s 480).
(d) Pension contributions. The contribution limits, whether through an employer scheme (s 776) or Personal Retirement Savings Account (PRSA), or a self-employed retirement annuity scheme (s 787), are:
(i) aged under 30: 15% of earnings,
(ii) aged 30-39: 20% of earnings,
(iii) aged 40-49: 25% of earnings,
(iv) aged 50-54: 30% of earnings,
(v) aged 55-59: 35% of earnings, and
(vi) aged 60 or more: 40% of earnings.
This 40% limit also applies to a sportsman or sportswoman.
The overall annual earnings limit for pension contributions is €115,000 (s 787B).
Unless you have a personal fund threshold (PFT), the standard fund threshold is €2,000,000 and the maximum tax-free lump sum on retirement is €200,000.
(e) Covenants. To be tax effective, a covenant must be payable to:
(i) a human rights body, or to a recognised college to carry out research, and exceed, or be capable of exceeding three years, or
(ii) an individual who is aged 65 or over, or permanently physically or mentally handicapped, and exceed, or be capable of exceeding six years.
The maximum income that be tax-effectively covenanted is 5%, but this limit does not apply to income covenanted to an individual who is permanently physically or mentally handicapped (s 792).
(f) Stock relief (farmers). This is given at 25% of the increase in stock value (s 666), 100% in the case of a young trained farmer (s 667), and 100% to the extent that proceeds of compulsory livestock disposals are reinvested in replacement livestock (s 668).
(g) Home renovation incentive. Provides an income tax credit of 13.5% of qualifying home improvement expenditure. It is paid over the two years following the year in which the work was carried out. The minimum qualifying expenditure is €5,000; the maximum is €30,000. Expires 31.12.2018 (s 477B).
(h) Help to buy scheme. Provides for an income tax rebate for “first time purchasers” (s 477C). To qualify, the property must be purchased or built as a principal private residence. The mortgage must be at least 70% of the purchase price, or for self-builds, 70% of the valuation approved by the mortgage provider.
From 19.07.2016-31.12.2016 the maximum relief is the lower of; €20,000 (purchase value between €400,000 and €600,000), income tax paid by the claimant for the 4 years immediately preceding the year of claim, or 5% of the house price (or self-build valuation).
From 01.01.2017-31.12.2019 , the same conditions apply but the valuation is between €400,000 and €500,000, with no relief granted on any property over €500,000.
Note: Cash buys do not qualify for the relief and you can not avail of the relief if you have previously bought, built or inherited a property, either individually or jointly with another party.
In computing tax due on your business profits, you do not get any allowance for depreciation of business assets. Instead, you get a capital allowance over several chargeable periods until the cost of the asset has been fully allowed.
Machinery or plant
If you dispose of an item of machinery or plant on which capital allowances were claimed, and the disposal results in an underclaim (or overclaim) of allowances, you may be due a balancing allowance (or subject to a balancing charge) (s 288).
A car (new or secondhand) costing over €24,000 is given an annual 12.5% wear and tear allowance as if the car’s purchase price were €24,000 (s 373).
The capital allowances and leasing deductions of cars bought or leased since 1 July 2008 are based on the level of carbon emissions (see Benefit in Kind, above). Cars with emissions above 190g/km get no allowance (s 380K).
A taxi or short-term hire car is given an unrestricted write off of the purchase price at 40% per annum on a reducing balance basis (s 286).
If you carry on a trade of leasing machinery or plant, you may only set off the related capital allowances against income from that trade. This is relaxed if not less than 90% of your activity consists of leasing (s 403).
If you purchase an industrial building for your business, you may be due:
(a) an industrial building annual allowance (also known as a writing down allowance) (s 272),
(b) an industrial building accelerated writing down allowance (also known as “free depreciation”) (s 273), or
(c) an industrial building (initial) allowance (s 271).
If the disposal of an industrial building on which capital allowances were claimed results in an underclaim (or overclaim), a balancing allowance (or charge) may arise (s 274).
Industrial buildings annual allowance may be claimed at the following rates:
(a) 15%, in respect of expenditure on:
(i) palliative care units (hospices),
(ii) private convalescent facilities,
(iii) private hospitals,
(iv) registered nursing homes,
(v) sports injury clinics,
(vi) airport buildings specified expenditure
(b) 10%, in respect of expenditure on:
(i) buildings for intensive livestock production,
(ii) market gardening structures.
(c) 4%, in respect of expenditure on:
(i) airport buildings, structures, runways, aprons,
(ii) camp/caravan site buildings and structures,
(iii) factories, mills, dock undertakings,
(iv) mineral analysis laboratories,
Unused accelerated allowances carried forward beyond the tax life of the building will be lost. However, if the tax life of the building ends before 31 December 2014, only capital allowances unused as at 31 December 2014 will be lost.
High Earners’ Restriction
Where your income exceeds €125,000, the maximum reliefs and exemptions you can claim is the higher of:
(a) €80,000, and
(b) 20% of your total income.
An EIIS investment (s 490) is not subject to this restriction.
Farm buildings, structures, milk quotas
If you are a farmer, expenditure on farm buildings may qualify for a farm building allowance of 15% in each of the first six years and 10% in the seventh year (s 658).
Expenditure on the purchase of a milk quota may be written off over a seven year period (s 669B).
A trading or professional loss can be offset against income from all sources (s 381). An unused trading or professional loss is automatically carried forward against such income for the next and later tax years (s 382).
A trading or professional loss can be increased by current capital allowances (s 392).
A Case IV loss may be set against Case IV income and any unused balance may be carried forward against Case IV income of later tax years (s 384).
An Case V (rental) loss may be set against Case V income and any unused balance may be carried forward for offset against rental income of the next and later tax years (s 385).
Double taxation is the imposition of comparable taxes in two or more states on the same taxpayer in respect of the same subject matter and for identical purposes.
There are three basic methods of relieving double taxation on income:
(a) the tax paid in the foreign country may be deducted (as if it were a business expense) when calculating the income that is liable to Irish tax,
(b) the tax paid in the foreign country may be credited against the Irish tax payable on the same income, or
(c) the income arising in the foreign country may be exempted from Irish tax.
The Irish government has negotiated double tax treaties (s 826) with: Albania, Armenia, Australia, Austria, Bahrain, Belarus, Belgium, Bosnia and Herzegovina, Botswana, Bulgaria, Canada, Chile, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Ethiopia, Finland, France, Georgia, Germany, Greece, Hong Kong, Hungary, Iceland, India, Israel, Italy, Japan, South Korea, Kuwait, Latvia, Lithuania, Luxembourg, Macedonia, Malaysia, Malta, Mexico, Moldova, Montenegro Morocco, Netherlands, New Zealand, Norway, Pakistan, Panama, Poland, Portugal, Qatar, Romania, Russia, Saudi Arabia, Serbia, Singapore, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Switzerland, Thailand, Turkey, United Arab Emirates, UK, Ukraine, USA, Uzbekistan, Vietnam, Zambia.
For full details, see Revenue